Is Bitcoin a safe investment in times of inflation? - Investing Platforms

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Is Bitcoin a safe investment in times of inflation?

Is Bitcoin a safe investment in times of inflation?



Opinions differ on the status of bitcoin in the face of inflation that worries many countries, including strong economies such as the United States and the European Union. Some see bitcoin as a good hedge against inflation because it is protected from rising prices, yet other experts and analysts contend that bitcoin is essentially risky after losing value in the wake of falling stocks.

In his article published by the site "CoinTribune", the writer Emil stantina said that there are several reasons why we should count bitcoin as a way to hedge against inflation, as the total offers of the currency in circulation is limited to 21 million units, unlike ordinary money, which increases its quantity indefinitely. In fact, central banks can print money for government assistance programs or for any other purpose, so prices for basic necessities can rise as well.

Bitcoin linked to gold

"Bank of America" -in a newly published report - questioned the status of bitcoin as a hedge against inflation, taking into account its connection to the stock market. This bank's two analysts identified bitcoin as a dangerous asset. According to them, the movement of cryptocurrencies tends to follow the movement of stock markets, and analysts larkish Shah and Andrew Moss highlighted how important the relationship between the "S & P 500" and"Nasdaq 100" indices and bitcoin is.

The value of bitcoin fell below 30 thousand dollars along with a significant decline in stocks after the announcement of the US Federal Reserve to raise interest rates by 0.5%. Bitcoin is battling rising inflation due to government stimulus measures in the wake of the covid-19 pandemic.

The crisis in Ukraine

Crypto expert Ben McMillan explained that the Russian-Ukrainian conflict has affected cryptocurrency prices mainly this year, and this concerns all risky assets. Previously, traders were able to take advantage of the relatively attractive price of cryptocurrencies from a long-term perspective, but currently, a significant decline is likely in the short term.

Although some consider bitcoin to be a store of wealth, its correlation with gold has been zero since June 2021, and its value has been negative for the previous two months.

However, bitcoin is still at the beginning of the maturity curve of the transition to the category of digital gold, and even then it still needs further care.